Canadian Tech

The Great Canadian Technology Revival

The Great Canadian Technology Revival

The Canadian Information and Communications Technology (ICT) sector is rapidly growing, according to the Canadian ICT sector profile. In 2014 the ICT sector accounted for 3.1% of national employment. That same year employment in the sector increased 1.2% (amounting to 545,800 jobs).

Growth in this sector during this time was twice as fast as for the overall economy (0.6%). Which begs the question, is Canada’s technology sector about to emerge amidst the the decline of the petro state and the fall of the Canadian dollar?

Over the past few years, the tech industry is outperforming the others on a variety of key metrics.

Let’s take a look at some of the opportunities for, and challenges facing the Canadian technology sector in 2016.

Home Grown Investments:

The Canadian ICT sector consists mostly of small companies. Interestingly, 31,000 of the 36,000 registered companies employ less than 10 people. This is a result of a combination of factors.

Canadian firms tend to have short life spans, which unfortunately often end in international acquisitions. Canada has become a shopping centre for international firms looking to buy up little guys, which has kept many firms from maturing domestically.  

This has become a problem. We are effectively losing our home grown talent. We need to take down our Silicon Valley ‘for sale’ sign. Because, although venture capitalists spent more in Canada in 2015 than they have in any other year over the past decade, Canada isn’t investing in tech the right way.

Of the world’s top 50 engineering schools, 3 of them are in Canada. Yes, this is good. But…

 

Flock and Flee:

International tech companies are taking advantage of this by engaging in acqui-hires, gobbling up Canadian born startups for purposes of acquiring the employed talent. This is bad. This means we are educating a workforce that we are not benefiting from.

That is why there is a need to invest in the tech sector not just in startups, but also shift some of the focus onto mid-to late stage companies. It is important to invest in getting things off the ground, but let us not forget the importance of investing to keep operations afloat and expanding.

Putting money into companies that have already put in work, and are seeking to grow, would likely keep more Canadian companies at home. Building a tech business in Canada comes with a number of challenges, but it also holds great opportunity, and so we must work to keep those opportunities here.

Canadian ICT Sector In Perspective:

 

Graph of Canadian companies by employee size for total ICT sector, 2014.
Canadian companies by employee size for total Information and Communications Technology (ICT) sector, 2014. Source: Canadian ICT Statistical Overview.
Canadian Information and Communications Technology (ICT) sector Gross Domestic Product (GDP) graph
Canadian Information and Communications Technology (ICT) sector Gross Domestic Product (GDP), from 2007-2014 in 2007 constant dollars.
Canadian ICT Sector Employment 2007-2014
Number of Canadian employed in the Information and Communications Technology Sector 2007-2014.


Brain Drain:

Finding the right people for tech jobs in Canada can be difficult, as the emigration of skilled talent has become a problem with many new graduates flocking to places like Silicon Valley for higher-paying and more lucrative positions than those offered here in Canada.

Many believe that American companies are freeloading off of Canadian tax dollars, and that the education budget should be reimbursed for this contribution to American tech firms, considering much of the skill being utilized is a result of subsidized Canadian tuition.

The problem is that the costs to the taxpayers which are accumulated as result of educating these young professionals, are not being returned in revenue. There is a return on investment shortage to the taxpayers, when many of the most highly skilled tech workers, such as engineers are going elsewhere once educated.

This skills and talent shortage in the Canadian workforce requires employers to seek foreign talent. However, this too proves difficult as lengthy immigration processes for prospective workers often discourage talent from choosing to come here.

Canada needs to work to keep her investments at home.

Trudeau and Tech:

While trying to move away from our identity as an energy power-house, Prime Minister Trudeau is working to rebrand Canada as hub for technological innovation and skilled labour. During his Davos speech, Trudeau infamously remarked that his predecessors wanted you to know Canada for its resources, while he would rather Canada be known for its resourcefulness.

Recently Trudeau has been attempting to attract investors in the Canadian technology industry. He contends that Canada has far more to offer than energy. With the goal of enticing and attracting investors he just attended a conference for the global business elite in Sun Valley.

 



But can Trudeau successfully market Canada as an international tech hub, especially given Canada’s skills emigration crises?

Canada is a great place for foreign direct investment, and for international companies to base themselves for business. All of the pieces are there for Canada to emerge as a tech superpower. We will remain on track so long as investment continues and talent is acquired.

Petro-State Subsidy:

As the price of oil drops, and the global economy recesses, the Canadian tech sector continues to flourish.

Why is this?

Well…

It could be due in part that for many companies, getting a better value on wages is not necessary to be profitable. As such, when the dollar drops the effects felt on technology companies will be minor. Especially compared to that of the manufacturing industry, where wages must be competitive in order to realize profit.

This makes the tech sector far more stable than natural resources.

Conclusion:


Technology and innovation sectors, according to the Toronto Stock Exchange (TSX) are the fastest growing since 2013. Additionally, more than 50 companies have gone public on the TSX since the beginning of last year. The growth is real, but in order to become more relevant we must become more competitive. We must move towards innovation and creation. Establishing Canada as a technology hub will take time and effort, but the payoff potential is huge. There has never been more promise facing the tech industry than there is right now.

By: Amberly Martin
Project Manager at Generation Digital Corp.

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